‘Tax free’ Wonderland – Middle East

Why I am a happy man to work in Dubai ?

Income Tax deduction has a very long history which started about 2500 year back . Currently every salaried person are getting hit by deduction of Income tax from 10% to 45% , taking almost major chunk of their earning . With high inflation and un-employment, the Income tax deduction is a heavy burden to an ordinary family. Indians including Punjabi are migrating to USA , UK , Canada , Germany , Australia, France , Italy , Spain and Middle East countries. A total of 32 millions Indian are living overseas , out of which 8 Millions are working in Middle East countries. All countries deduct Income tax except in Middle East  ( Arab countries)

History of Income Tax

Historically Income tax were collected in different shape like livestocks, grains , first fruits , Gold , gemstone , pearl , Coins etc . By 10^thAD , emperor Wang Mang of China started collected income tax from Chinese people. Ancient Egyptian Pharos taxed on oil and other items. During Roman empire Tax was collected in Greece, Germany and other countries. Most of these taxes were for protection monies or fighting the wars.

Type of Tax

History of civilisation tell that during period when there was no currency in circulation Tax was deducted in different shapes majorly  to supporting the wars. Hennery II king of England started charging 10% income tax in year 1188 .  To finance war during French revolution UK prime minister William Pitt introduced income tax in 1798. In America Income Tax was introduced in 1861 during American civil war , it was abandoned in 1872 but reimposed in 1894. In Year 1913 USA introduced peace time Income tax . Canada introduced income tax in year 1917 to finance the World war . In India Income Tax was introduced by British Finance Minister in year 1861 . Since British has ruled 90% of the world , Income Tax were introduced historically in most of the countries and still being deducted but at various rates. In the past Income Tax was deducted to support the war but now it is deducted for the development of the country.

Income Tax free Middle East countries

Middle East countries which were full of desert were controlled by different tribes in the past who do not deduct Income tax. These countries are located in south of Iran . It comprises of  Saudi Arab , Kuwait , Oman , Qatar , Bahrain , UAE ( Dubai , Abu Dhabi , Sharjah , Ajman , Ras Al Khaimah  , Fujairah , Um Al Quan ) . These countries economy are based on Oil export and are heavily dependent upon overseas workers.  8 Millions Indian ( 25% of NRI living outside India ) working in these countries do not pay any Income Tax in the country of work , which is very unique from rest of the world.

Income Tax Range

The countries where most Indians are migrating and settling down have Income Tax system with different %age rate of Tax deduction . If any country is rich that does not mean that they will not charge Income Tax . Income Tax money is included as a part of country budgets which is used  for various development . Many countries in the Middle East do not charge income tax on salaries. This is a great attraction to Indian working there.

Population & GDP

Population is directly linked to GDP . If the countrymen produce high output the GDP will be higher, and they will be earning and spending more. And if the countrymen have lay back attitude the GDP will be low and thus their earning will be less. GDP %age growth year by year of each country will tell the prosperity of each country and their people standard of living. People living in countries with higher GDP growth always face higher inflation and living cost. GDP of oil producing Arab countries depend upon their production of oil and market price of Oil.  As majority of population in Oil producing countries in middle east are expats, dip in oil price can create un-employment resulting in to expats going back to their home countries. Indian NRI are affected in this scenario. The average GDP of these Middle east countries are almost equal to Singapore, which is considered as developed country. Average Income Tax in Singapore is 12% VS zero in listed Middle East countries.

Average Monthly Income & Food Cost

Monthly Income in major countries depend upon which continent they fall in. Monthly Income is not a guideline that the person living in particular country is rich and living a comfortable life , it is linked to the household expenses including housing cost . Tax free Gulf countries which are surrounded by vast desert with less rain usually import food that’s why they have higher monthly food cost. In some country despite having higher income the potential of saving is negligible due to higher living cost. Average monthly income of listed six middle east countries is $3,700 is almost equal to Germany , which is developed European country. Monthly Food Cost is another barometer to gauge the living comfort in a particular country .  Food cost are high in countries who import food .

My Middle East Experience

I #ESKmehta have been working as an Engineer for over 20 years in UAE ( Dubai , Abu Dhabi ) , Kuwait and Muscat . For an ordinary India to find a job close to his homeland, countries in the middle east are the good option as they recognize Indian qualification. Most of these countries are surrounded by the desert land with very little water. These countries have very low native population. After they found Oil and Gas in abundance these countries became rich and now are spending heavily for development with world class infrastructure and amenities. Eg. In Dubai 220 Skyscrapers were constructed between 1999 to 2022 , that is the amount of spending Govts are doing . This has resulted in to additional manpower requirement from Adjoining country like  India , Pakistan , Bangladesh and other. More than 30% population of Dubai are Indian majority of which are working for construction related industries. No body pay Income tax in Dubai and like wise in rest of UAE or other listed Middle East countries.

Looking in to the details related to countries like USA , the average monthly income of seven countries listed above is $3,800 . Average income tax is 17% = $650 . The carry home income is = $3,800 – less Income tax $650 = $3,150 . Whereas the average monthly income of six listed Middle East country  is $3,700 . Income tax in these country is $ zero . Carry home average monthly income in middle east countries is $3,700- Less income Tax 0 = $3,700. In a bigger picture , Indians working in middle east countries carry home more salary than average of western countries listed above. This is my experience too. #ESKmehta

The only draw back for NRI working in these Middle East countries is that they live there on contract basis and can’t stay permanently. No expatriate can obtain Passport of these Middle East countries. The stability of old aged NRI in these countries is zero , one has to return back to his native land one day after their retirement. If someone can secure their financial stability for the retirement , NRI working in these Tax free Middle East countries are living in a Wonderland.